There is now a large body of case law in which the High Court and Court of Appeal have given guidance about the correct approach when Alternative Dispute Resolution (ADR) has been suggested and the consequences that follow if an offer to engage in it has been unreasonably refused.
Judicial movement is in a relentless direction : those who refuse to engage in ADR (including ADR in costs disputes) without good reason, will face costs sanctions. In addition, the court can impose types of ADR on parties (e.g. Early Neutral Evaluation) even against their wishes.
Halsey v Milton Keynes General NHS Trust [2004] 3 Costs LR 393
“All members of the legal profession should now routinely consider with their clients whether their disputes are suitable for ADR”
PGF II SA v OMFS [2013] 6 Costs LR 973
"In my judgment, the time has come for this court firmly to endorse the advice given in Chapter 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...".
BXB v Watch Tower and Bible Tract Society of Pennsylvania [2020] Costs LR 341
The Defendant (D) failed to follow a court direction to consider ADR (including mediation) at all stages and refused to attend a joint settlement reason without explaining why. Indemnity costs would be ordered from 6 months earlier than the last date that Claimant’s (C) Part 36 offer could have been accepted,
DSN v Blackpool Football Club [2020] Costs LR 359
C beat his Part 36 offer at trial. D failed to engage in mediation and failed to advance adequate reasons for declining to doing so. Award of indemnity costs from one month after the court had given a direction about mediation with which the defendant had failed to comply.
Wales v CBRE Managed Services Ltd [2020] Costs LR 603
C offered to mediate prior to issue of proceedings, and again a month before trial. The Court accepted that mediation would have had a reasonable prospect of success: D’s costs reduced to 50%, until the date it had made an offer for the claim to be withdrawn on terms that each party bear its own costs, which was not engaged with by C.
Jagger v Holland [2020] Costs LR 541
Blameless third D’s application for indemnity basis costs refused due to failure follow a court direction to consider settling the litigation by ADR and to explain its refusal to do so in a witness statement.
Reid v Buckinghamshire Healthcare NHS Trust [2015] EWHC B21 (Costs) Master O’Hare
“… If the party unwilling to mediate is the losing party, the normal sanction is an order to pay the winner’s costs on the indemnity basis, and that means they will have to pay their opponent’s costs even if those costs are not proportionate to what was at stake.
Various Claimants v Mirror Group Newspapers SCCO 4 October 2016- Master Gordon-Saker
“It seems to me that there has been a blanket refusal by the defendant to engage in any sort of alternative dispute resolution…. Accordingly, I have no hesitation in concluding that the defendant has behaved unreasonably in failing to engage in the process of discussing at least the possibility of alternative dispute resolution and mediation in particular…. The defendants’ conduct is unreasonable to a high degree and such to justify an award of costs on the indemnity basis”
Bristow v Princess Alexander Hospital NHS Trust
[2015] EWHC B22 (Costs) Master Simons
“The parties should be encouraged to enter into mediation and if one party fails to enter into mediation and that failure is unreasonable, then there should be a sanction….It took three months for them [the defendants] to reject and they gave no good reason other than the fact that the case had already been set down for a detailed assessment…I think that the correct sanction is that the claimant should receive their costs on an indemnity basis on their 80% costs as a sanction for the Defendants’ failing to engage in mediation”.
Lomax v Lomax [2019] Costs LR 1431
Under CPR 3.1 (2)(m) the court can order ENE whether or not the parties agree.
D failed to follow a court direction to consider ADR (including mediation) at all stages and refused to attend a joint settlement reason without explaining why, even though the possibility of agreeing quantum subject to liability provided a good reason to engage in discussions. Indemnity costs would be ordered not from 30 July 2019 being the last date that C’s Part 36 offer could have been accepted, but 25 February 2019 when the defendant had unreasonably refused to engage in ADR.
Seals and Seals v Williams [2015] 4 Costs LO 423
Order for ENE to afford the judge an opportunity to make non-binding recommendations as to the outcome appropriate where the parties have asked for a judicial expression of provisional views on particular hypotheses.
Jagger v Holland [2020] Costs LR 541
Blameless third D’s application for indemnity basis costs refused due to failure follow a court direction to consider settling the litigation by ADR and to explain its refusal to do so in a witness statement.
Patel v Barlows Solicitors [2020] Costs LR 1897
D2’s submission, that an indemnity basis order was inappropriate because C had failed to engage in mediation, was unsustainable. The case against D2 had been strong, there had been other methods of settlement which had not worked and the costs of mediation would have been high, in circumstances where it was difficult to see how the ADR would have worked. In any case, C had not rejected the offer of mediation outright, but had indicated that work was being done on an offer and that any mediation should be paused pending this. “Without prejudice” communications had been attempted and had failed and, in these circumstances, there had been no need to explore mediation any further as it would have been unlikely that either party would have been prepared at any mediation to make the sort of concession which would have resulted in a resolution.
Philip Warren & Son Ltd v Lidl Great Britain Ltd and Others [2021] Costs LR 1015
[2021] Costs LR 1015
Where a claim had been dismissed, the claimant's failure to accept the defendant's Part 36 offer did not justify an award for defendant's costs on the indemnity basis. The Defendant's refusal to engage in mediation did not merit a substantial reduction in costs, in circumstances where mediation was unlikely to have achieved a settlement.
Hurst v Leeming [2003] 2 Costs LR 153
No penalty due to attitude of opponent that mediation had no real prospect of getting anywhere [18]
Reed Executive PLC v Reed Business Information Ltd [2004] 4 Costs LR 662
Consequences of lateness in proposing ADR and after most of the costs incurred [43]-[45]
Roundstone Nurseries Ltd v Stephenson Holdings Ltd [2009] 5 Costs LR 787
Cancellation/withdrawal from mediation : costs of ADR as a discrete process which had been thrown way recoverable in principle as costs “incidental to the litigation”. [53-54]
Burchell v Bullard [2005] 3 CLR 507
Pre action (in 2001) offer to mediate before “crippling costs” incurred : no sanction for failure punished because the law not fully developed at the time of the refusal [42]-[43]
Hickman v Blake Lapthorn and Fisher [2006] 3 Costs LR 452
No penalty in costs for refusal to mediate where D had refused to adopt a commercial approach which would have involved making an offer of more than the claim was worth.
Malmesbury v Strutt & Parker [2008] 5 Costs LR 736
Consequences of a paying party taking an unrealistic and unreasonable position at a mediation. “A party who agrees to mediation but then causes the mediation to fail by his reason of unreasonable position in the mediation is in reality in the same position as a party who unreasonably refuses to mediate” Jack J.
Strachey v Ramage [2009] 1 Costs LR 9
Failure to mediate : costs reduced by one third [14]
Rolf v De Guerin [2011] 5 Costs LR 892
Spurned offers to mediate or enter into settlement negotiations which had reasonable prospects of success, were unreasonable and justified no order as to costs [48]-[49]
PGF II SA v OMFS Company and Another [2012] 3 Costs LO 404
Part 36 offer accepted out of time. Claimant entitled to costs to the expiry of the date for acceptance. No order as to costs thereafter because of the conduct of the defendant who had unreasonably refused to consent to mediation.
Swain Mason v Mills [2012] 4 Costs LO 511
The defendant’s attitude to mediation (refusal to contemplate the possibility of mediation) reflected in an order that the claimant pay 60% of D’s costs of the proceedings not 100%.
Wright v Michael Wright Supplies Ltd [2013] 4 Costs LO 630
Mediation is a proper alternative to litigation which should be tried and exhausted before resorting to a trial of the issues [3].
Northrop Grumman Mission Systems Europe Ltd v BAE Systems (Al Diriyah) [2014] 6 Costs LO 879
Unreasonable conduct by winner in refusing to mediate cancelled out by loser not accepting a Part 36 offer. No costs.
Lynn v Borneos LLP [2015] 3 Costs LR 439
Bland refusal or no response to any invitations to mediate where C recovered just £1 at trial. D entitled to costs of the action as the successful party but reduced to 60% for failure to engage.
Garritt-Critchley [2015] 3 Costs LR 453
Failure to engage in mediation: case settled during trial : D to pay C’s costs of action on the indemnity basis.
Laporte v The Commissioner of Police of the Metropolis [2015] 3 Costs LR 471
D’s costs reduced by one third for failing without adequate justification to engage in mediation, even though he had won on every substantive issue.
Murray v Bernard [2015] 5 Costs LO 567
Hostile litigation opposing a will. Initial refusal to mediate by claimants who changed their minds and agreed to mediate insufficient to deprive them of any of their costs payable by the defendant. [5]
Orientfield Holdings Ltd v Bird & Bird LLP [2015] 6 Costs LO 667
No penalty for refusing to mediate at an early stage where the window of opportunity was narrow. Thakkar v Patel [2017] 2 Costs LR 233
Silence in the face of an offer to settle in the face of an offer to mediate is, absent exceptional circumstances, unreasonable conduct meriting a costs sanction, even in cases where mediation is unlikely to succeed.
Car Giant v The Mayor and Burgesses of the London Borough of Hammersmith [2017] 2 Costs LO 235
The court should be slow to criticise a party’s behaviour where decisions such as when to mediate are matters of tactical importance eg after experts’ views have been obtained. No penalty. [27.2 – 29]
Gore v Naheed and Ahmed [2017] 3 Costs LR 509
No disallowance of the claimant’s costs for failure to mediate: preference to have rights determined by a court of law rather than by a mediator could not be unreasonable conduct (but the case, albeit Court of Appeal, is out of step with other decisions on ADR).
PJSC Aeroflot v Leeds [2018] 4 Costs LR 775
Allegations of fraud and serious wrongdoing made the proceedings intrinsically unsuitable for mediation.
Parker Lloyd Capital v Edwardian Group [2018] 6 Costs LR 1235
Order that the losing C should pay the successful D’s costs on the indemnity basis : D’s decision not to mediate in a hopeless case where the request for mediation was a tactic intended to extract a nuisance payment, was an not unreasonable refusal.
Nicholls v Nicholls [2018] 6 Costs LO 705
Defendant’s costs payable out of an estate reduced by 50% to reflect his attitude to chattels and mediation.
Burgess v Penny [2019] Costs LR 1453
Refusing to mediate because one party could not obtain something which even complete success in the litigation could guarantee, was unreasonable. Accordingly, the unreasonable defendants ordered to pay their own costs out of their inheritances rather than the testator’s estate.
