The overriding objective of the Courts of England and Wales requires the Courts to conduct cost proportionate and justly handled cases. As part of this objective, in recent years, Courts have actively encouraged parties to engage in alternative dispute resolution (ADR), including mediation, partly by making cost sanctions against parties that ‘unreasonably refused’ to engage in ADR.
The general rule regarding costs is that the losing party should pay the winner’s costs; however the Court has discretion in how costs should be awarded (under CPR Rule 44) and can refuse to grant costs in certain situations. One such situation is if the successful party unreasonably refused to mediate or attempt other forms of ADR.
In a recent High Court case Mr Justice Mann considered the position where the successful party, the Claimants, had initially refused to mediate and the Defendant sought to prevent them getting an order for costs as a result.
The Defendant argued that the Claimants should not have an order for costs made in their favour because they failed to take an opportunity, or accept an offer, to mediate. An order of Master Teverson dated 3 December 2013, from an initial hearing, recorded the refusal to mediate on the part of the Claimants. During the course of the hearing to which Master Teverson’s order related, the Claimants were warned by the Master that their refusal was potentially ‘a high risk strategy’ in relation to their potential costs recovery.
The Claimants subsequently had a change of heart, and gave their agreement to mediate approximately one month after their initial refusal. However, the provisionally planned mediation did not in fact take place as the Defendant then felt that he was not ready to mediate.
Mr Justice Mann, decided that this was not a case in which it could be said that the Claimants failed to mediate, despite their initial refusal to do so. He said the Claimants did not have only one opportunity to mediate for the purposes of the costs rule. He said the reason why “a party may be penalised in costs for a wrongful refusal to mediate is because parties are not to be encouraged to refuse opportunities to settle cases”. However, in this case, the Claimants changed their minds and decided to mediate, they, therefore, could not be criticised for refusing to mediate.
This case confirms that a party will not automatically receive adverse costs consequences for a delay in agreeing to mediate. However, in practice, it is a risky strategy to initially refuse to mediate, but later change your mind and expect this to have no effect on costs in every case.
The Court has a wide discretion as to costs (under CPR Rule 44), and it will consider costs based on the facts of each case. In this case, the Claimants were relatively quick to change their minds about mediation, following the order of Master Teverson, and the Defendant subsequently refused to mediate. Both of these factors will have been taken into account by Mr Justice Mann in his decision to grant costs to the Claimant, therefore, the decision may have been different in the absence of these factors.
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 Murray and another v Bernard