UK: Further guidance on when refusal to mediate may attract costs sanctions

A recent High Court decision has provided a further example of a successful defendant being deprived of a portion of the costs it otherwise would have been awarded because it was found to have unreasonably refused to engage in ADR (applying the guiding principles laid out by the Court of Appeal in Halsey v Milton Keynes General NHS Trust [2004] 1 WLR 3002):  Laporte & anor v Commissioner of Police of the Metropolis [2015] EWHC 371 (QB).

In particular, the judgment is interesting for its consideration of two arguments frequently relied on by parties seeking to justify a failure to engage in ADR: (i) the strength of the party's case and (ii) the unlikelihood of a mediation being successful.  Notably, the court warns litigants against dismissing mediation as futile purely on the basis of the stance adopted by their opponent up to that point - 'tactical positioning should not be too easily labelled as intransigence'.

In that regard, the decision can be seen as an example of the courts increasingly recognising the potential for mediation to be effective even where parties seem to be 'miles apart' prior to the process - either because of one party's belief it has a 'watertight' case or otherwise.  It serves as a reminder that a party considering refusing to mediate (or to mediate at a particular time) on the grounds that a mediation would be unlikely to succeed should consider that decision very carefully  - and ensure that the reasons supporting that view are fully set out at the relevant time.

Hattie Middleditch

Associate,
Dispute Resolution, London
Email
+44 20746 62291

Jan O’Neill

Professional Support Lawyer,
Dispute Resolution, London
Email
+44 20746 62202

Background

The Court was required to determine costs at the conclusion of the claimants' unsuccessful proceedings bought against the defendant Commissioner seeking damages for alleged assault, battery, false imprisonment and malicious prosecution.

The claimants argued that there should be no order for costs given, amongst other things, the Commissioner's unreasonable refusal to engage in ADR.  The claimants relied on several features of the Commissioner’s behaviour over the course of the dispute, including its failure to respond to a formal offer of mediation from the claimants, even after a court order directing it to respond.   Following several more approaches, the Commissioner had finally agreed to meet with the claimants in mediation. However, despite further approaches by the claimants, arrangements had not been concluded nine months later when the defendant advised (without providing substantive reasons) that it was no longer prepared to mediate.

Decision

The Court undertook its assessment of the defendant's conduct against each of the six relevant factors identified in Halsey. 

(i) The nature of the dispute

The Commissioner sought to argue that the dispute was unsuitable for ADR as the claimants were seeking to litigate a point of legal principle regarding the scope of police powers and were alleging misconduct by a police officer, both of which it said made a private settlement inappropriate.

The court rejected that argument. While not directly addressing the question of whether the inclusion of those allegations made the claimants' case as a whole unsuitable for private resolution, the court noted that the damages claim did not depend entirely on those allegations being established and that there were issues of pure fact to be resolved, on which both sides ran the risk of adverse finding.  Those features appear to have been suficient for the court to conclude that it was 'unrealistic' to suggest that settlement by way of ADR would be inappropriate.

(ii) The merits of the case

In Halsey it was held that “the fact that a party reasonably believes that he has a strong case is relevant to the question of whether he has acted reasonably in refusing ADR”. Otherwise, there would be considerable scope for a claimant to use the threat of a costs sanction to extract settlement, something which the courts should guard against. However, while each case will turn on its own facts and there have been recent decisions upholding a party's right to refuse mediation on this basis (see here, for example), the continuing trend toward encouragement of ADR has seen judges being increasingly reluctant to accept this as justification for refusal to mediate.  Here the Commissioner's prior apparent willingness to mediate was taken by the Court to be a concession that the merits of its defence were not perceived to be so strong as to have justified a refusal to engage in ADR.

(iii)   Whether other settlement methods had been attempted

The Commissioner had made no offers to settle the case or other attempts at ADR before mediation was suggested and could not assert that it had exhausted all other opportunities of resolving the case without litigation.

(iv)  Whether the cost of mediation would be disproportionately high

The Commissioner had conceded that the costs of mediation would not have been disproportionately high. However, it did contend that the amount required to settle would have included a large costs liability to the claimant.  This, in the Court’s opinion, was potentially relevant to the question of whether mediation had a reasonable prospect of success (see below).

(v)  Delay

As the mediation proposal was made (and reiterated) well in advance of the trial date, there was no risk of a mediation delaying the trial and the Commissioner could therefore not rely on the possibility of such delay to justify its position.

(vi)  Whether mediation would have had a reasonable prospect of success

The Court of Appeal in Halsey considered that it was inappropriate when considering this factor for the court to confine itself to an assessment of whether “objectively viewed” mediation would have a reasonable prospect of success. This it held was an unduly narrow approach, which focused solely on the nature of the dispute and left out of account the parties’ willingness to compromise and the reasonableness of their attitudes.

In the present case, the Commissioner's primary justification for resisting and ultimately refusing mediation was that it had (through its solicitor) formed the impression that the claimants considered a money offer to be a prerequisite to any compromise and that, as the defendant was unlikely to make such an offer, it considered that any mediation attempt would be futile and not an appropriate use of time and resources.  In rejecting this argument, the court noted:

• at no time had the claimants actually insisted that the making of a money offer would be a formal precondition to engaging in ADR (although it is noted that they appear to have come close to doing so, including in written confirmation that ''their view remains that a payment of compensation will be necessary to compromise this claim; however they are of course willing to listen to what your client has to say in that regard and vice versa in the spirit of ADR');
• at no time had the defendant in fact excluded the possibility of making a money offer; and
• it is always likely that those representing a party in a dispute will seek to lower the other parties' expectations in preparation for a settlement discussion.  However, a prediction as to what it might take to achieve a settlement, before the negotiations have even begun, does not entitle the other side to treat that, without more, as  a precondition to settlement and justify it in dismissing ADR as doomed to failure.

The Court concluded that the Commissioner had failed without adequate justification to engage in ADR which had a reasonable prospect of success. In assessing costs, the Court highlighted the need to look at the Commissioner's conduct in the proceedings as a whole, taking into account also his separate failure to respond to a letter before action and various flaws in costs schedules provided.  The Commissioner was awarded two thirds of its costs, to be assessed on the standard basis.