Potential costs implications of refusal to mediate

To what extent can a refusal to engage in mediation, or another form of ADR, result in a costs penalty? Usually, a successful party in litigation will normally recover the majority of its costs from the losing party.

However, the Court has a discretion in awarding costs, and “unreasonable behaviour” can result in a loss of part or whole of a costs order.

It is not automatically the case that party who refuses mediation will have behaved “unreasonably” however.

In the case of ADS Aerospace Ltd v EMS Global Tracking Ltd (2102) EHWC 2904 (TCC), the High Court considered costs arguments following a high value commercial case in which the Claimant had lost on all the key issues between the parties and that overall the Defendant won.

From the judgment it is clear that the parties had communicated regarding potential settlement during the case without success. The Claimant had raised the prospect of mediation shortly before trial, but given the Claimant’s previous indicated view as to the value of its claim compared to that of the Defendant’s, the Defendant’s lawyers replied saying a formal mediation was not necessary. It should be noted that the parties were over £4m apart on their previous offers!

The Claimant lost the case, and argued that the Defendant acted unreasonably in refusing the request to settle in mediation.

Akenhead J cited the leading authority of Halsey v Milton Keynes NHS Trust. In particular in that case Dyson LJ stated: “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”.

The Court considered the so-called “Halsey factors” namely:

  • (i) The nature of the dispute
  • (ii) the merits of the case
  • (iii) the extent to which other settlement methods have been attempted
  • (iv) whether the costs of the ADR process would be disproportionately high
  • (v) whether any delay in setting up and attending ADR would have been prejudicial
  • (vi) whether the ADR process had a reasonable prospect of success.

In ADS Aerospace the Judge was not satisfied that Laptop Data RecoveryDriveSavers is your best option for professional laptop how to recover deleted files services. the Defendant did not act unreasonably in refusing mediation as:

  • (a) The Claimant had not shown any willingness to engage in earlier without prejudice discussions, as had been proposed by the Defendant;
  • (b) In discussions the Claimant had shown a strong view that it was entitled to a substantial sum and that it was not interested in a nuisance payment;
  • (c) The Defendant was at all times prepared to engage in without prejudice discussions;
  • (d) The lateness of the suggestion of mediation, shortly before trial was also a factor;
  • (e) The Judge did not believe that the Defendant acted unreasonably in believing that it had a very strong case on liability, causation and quantum. The Judge remarked that on hearing the evidence he doubted whether the Claimant would have given substantial ground at mediation from its view of the case.

As can been seen from this case, the Court will look at the conduct of the claim throughout. This case is an extreme one though in the difference between the parties on their valuation of the claim.

As a note of caution, most cases will be significantly closer in value, and the new costs regime may make it more likely that this argument is run successfully in future.